MILAN Shares in Italy's third-largest lender Monte dei Paschi di Siena (BMPS.MI) rose sharply for a second consecutive day on Thursday after newspaper reports that its biggest investor had sold a stake in the troubled bank.
Italian financial daily Il Sole 24 Ore said the foundation that has more than 30 percent of the Tuscan-based bank sold a stake of around 8 percent to investors that included U.S. hedge fund Och-Ziff, at a price of 0.16-0.17 euros.
Il Messaggero daily said a 12 percent stake had been sold and also named Och-Ziff as a buyer.
"The talk is this fund based in Virginia bought the shares and it's triggered short-covering today on the part of those left out. There are the technical grounds for this rally to continue," a Milan trader said.
"This is a fund with a good track record since it has previously bought stakes in Icelandic banks," another trader said.
At 0834 GMT shares in Monte Paschi were up 8.6 percent at 0.238 euros after having been halted limit up. The European banking index .SX7P was up 1 percent.
The stock soared 20 percent on Wednesday, triggering speculation that the foundation - which needs to cut its stake to pay back debts - might have sold some or all of its holding.
Och-Ziff and the Monte Paschi Foundation were not immediately available for comment.
The cash-strapped Monte dei Paschi foundation has been trying to find buyers for its stake for months to pay back creditors.
It is keen to sell the bulk of its stake before a 3 billion euro capital increase the bank is due to launch in June.
(Reporting by Stephen Jewkes and Isla Binnie, additional reporting by Stefano Bernabei; Editing by Erica Billingham)